In the last seven days there has been a flurry of announcements and comment, particularly around some early distribution changes in the second charge market. For example Precise announced a direct-to-broker proposition followed by announcements on the creation of second charge lending panels by a number of mortgage clubs.
In our view, it is difficult to gauge the appetite of mortgage intermediaries to advise on second charges so soon after the implementation of Mortgage Credit Directive. However, what we have seen is the vast majority of our intermediary partners opting to outsource the advice.
This is understandable given the current second sourcing platforms available. The majority of seconds sourcing is based on delivering very approximate costings, which is suitable if you want a very broad range of costs, but wholly inadequate if you are relying on these systems as a basis for advice. The risk any intermediary needs to manage is ensuring they can strike the balance between developing the necessary in-depth knowledge of second charge products and criteria across a broad spectrum of lenders while delivering high quality second charge advice.
That is why it was reassuring to see mortgage clubs launching their panels alongside master broker partners. The support available from master brokers for those firms looking to advise on second charges is vastly superior to the current available technology to deliver the sourcing of seconds.
Seconds, by nature, are often complex non-standard cases. It is absolutely vital that any borrowers’ application is assessed by an adviser who has expert knowledge of the broader second charge products available. This will ensure that the borrower ends up with the best available product to meet their needs at the lowest possible cost and at the same time can proficiently establish product eligibility. The value of partnering with a second charge specialist cannot be underestimated in this respect.
On the other hand, firms looking to fly solo need to consider how cases will be processed. Most second charge lenders outsource the loan processing to master broker partners.
There also needs to be a cautionary note around the validity of the term ‘independence’. If you are relying on a restricted second charge panel – you will need to be able to demonstrate that you are advising on a sufficiently broad range of products, which is unlikely if your panel only consists of a handful of lenders.
Let us be clear – it is hugely positive that mortgage intermediaries are being given more reasons to include seconds in their advice proposition – this is a big win for the second charge industry and will be a key driver of much needed growth in this sector. One headline this week read ‘The Death Knell for Master Broker Firms” – but for our sector, providing there is a sensible approach to fees adopted on a much wider scale, partnerships with master broker firms can continue to deliver enormous value to those less familiar with second charge lending.